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Fitch affirms ratings of three private Uzbek banks

Business Materials 9 February 2016 12:27 (UTC +04:00)
Fitch Ratings has affirmed PJSB Trustbank's (TB) and Ipak Yuli's Bank (IY) Long-term foreign currency Issuer Default Ratings (IDR) at 'B-' with Stable Outlooks, and assigned Universalbank (UB) a 'CCC' Long-term foreign currency IDR, Fitch said Feb. 9.
Fitch affirms ratings of three private Uzbek banks

Tashkent, Uzbekistan, Feb. 9

By Demir Azizov- Trend:

Fitch Ratings has affirmed PJSB Trustbank's (TB) and Ipak Yuli's Bank (IY) Long-term foreign currency Issuer Default Ratings (IDR) at 'B-' with Stable Outlooks, and assigned Universalbank (UB) a 'CCC' Long-term foreign currency IDR, Fitch said Feb. 9.

Ipak Yuli Bank

Long-term foreign and local currency IDRs: affirmed at 'B-', Outlook 'Stable'
Short-term foreign and local currency IDRs: affirmed at 'B'
Viability Rating: affirmed at 'b-'
Support Rating: affirmed at '5'
Support Rating Floor: affirmed at 'NF'

Trustbank

Long-term foreign and local currency IDRs: affirmed at 'B-', Outlook 'Stable'
Short-term foreign and local currency IDRs: affirmed at 'B'
Viability Rating: affirmed at 'b-'
Support Rating: affirmed at '5'
Support Rating Floor: affirmed at 'NF'

Universalbank

Long-term foreign currency IDR: assigned 'CCC'
Long-term local currency IDR: affirmed at 'CCC'
Short-term foreign currency IDR: assigned 'C'
Short-term local currency IDR: affirmed at 'C'
Viability Rating: affirmed at 'ccc'
Support Rating: affirmed at '5'
Support Rating Floor: affirmed at 'NF'

The VRs consider the challenging operating environment, including difficult business climate, structural weaknesses in the economy, high concentration risk and external pressures.

"The ratings are also constrained by the high transfer and convertibility risks in the economy due to the country's tightly regulated FX market and the banks' modest franchises in the state-dominant banking sector," Fitch said.

Universalbank's rating was also constrained by past regulatory issues resulting in the withdrawal of its license on foreign currency operations in 2012. However, in June 2015, the Central Bank of Uzbekistan (CBU) returned the bank's license and its foreign currency operations were restored. Following this, Fitch has assigned UB a 'CCC' Long-term foreign currency IDR.

The Stable Outlook on TB and IY reflects Fitch's expectations of further economic growth and government-led investments into major manufacturing sectors, which will support the banks' lending growth and profitability.

Reported problem exposures remain moderate, with impaired loans at below 4% of gross loans at all three banks at end-3Q15 (local GAAP). Concentration risks remain high, particularly at TB and UB, with the 25 largest borrowers accounting for 63% and 72% of loans, respectively, at end-3Q15. IY has a more granular loan book, with the top 25 largest exposures below 25% of total loans.

The capitalisation of all three banks remained stable with Fitch Core Capital ratios at a reasonable 17% at TB, 23% at UB and lower 11% at IY at end-2015. These capital cushions provided TB and UB comfortable additional loss absorption capacity of 9% and 20% of gross loans, respectively.

A new UZS10bn capital injection expected in 1H16 should stabilise its capitalisation at about 12%.

Core funding is from customer deposits (60% of total liabilities at IY, 87% at TB and 95% at UB), which are short term but relatively stable at all three banks.

The banks' Support Rating Floors of 'No Floor' and their '5' Support Ratings reflect their limited systemic importance and that rendering of extraordinary support from Uzbek authorities is unlikely. The ability of the banks' shareholders to provide support cannot be reliably assessed.

An upgrade of TB and IY would depend on the overall notable improvement in the operating environment. UB's ratings may be upgraded if the bank is able to significantly improve its franchise along with asset quality and tightening of risk policies.

Trustbank, with its main focus on rendering financial services to the companies on the stock exchange and wholesale trade, was established in 1994. It was transformed into a private bank upon the shareholders' decision in 2006.

"Universalbank" was created in 2001. The shareholders of the bank are private companies and physical entities.

"Ipak Yuli" bank was created in 1990. The bank`s shares are owned by about 1000 shareholders - legal and physical entities, the largest of which are the "UzbekInvest" National Export-Import Insurance company (about 18 percent) and the Asian Development Bank (13.56 percent).

Uzbekistan currently has 26 commercial banks. Three of them are state-run banks, five banks with foreign capital, 11 - joint-stock banks and seven private banks.

As of Feb. 9, the official exchange rate is 2841.60 soums/$1.

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